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Cablegate: Ukraine Signs Bilateral Wto Agreement with Kyrgyzstan,

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PP RUEHDBU RUEHIK RUEHLN RUEHPOD RUEHVK RUEHYG
DE RUEHKV #2824/01 3191356
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P 151356Z NOV 07
FM AMEMBASSY KYIV
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RUEHZG/NATO EU COLLECTIVE

UNCLAS SECTION 01 OF 02 KYIV 002824

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E.O.: 12958: N/A
TAGS: ETRD WTRO ECON PGOV UP
SUBJECT: UKRAINE SIGNS BILATERAL WTO AGREEMENT WITH KYRGYZSTAN,
REMOVES MAJOR OBSTACLE TO ACCESSION

REF: A) BISHKEK 1354
B) Kasper-Klein Email of 11/01
C) KYIV 2722
D) KYIV 2500
E) KYIV 331

1. Summary: Ukraine signed a WTO bilateral agreement with Kyrgyzstan
on November 14, removing the major hurdle to accession. The GOU
agreed to pay $27.3 million worth of humanitarian assistance to
Kyrgyzstan in order to secure the deal. Meanwhile, the GOU reports
that it has also signed an agreement with Vietnam, the last needed
for accession. Disagreement with the EU over export duties remains
the only unresolved issue. The GOU still needs to follow up on
several commitments of importance to the USG, but we are confident
that these issues will not delay accession. With the Kyrgyz
agreement now signed, Ukraine is poised to wrap up accession within
a matter of months. End Summary.

Kyrgyz Bilat - Done
-------------------

2. Following high-level negotiations in Bishkek November 12-14 (ref
A), Ukraine and Kyrgyzstan signed a WTO bilateral Market Access
Agreement on November 14. Ukrainian Foreign Minister Arseniy
Yatsenyuk made the announcement to the media late in the evening on
the 14th, and the official website of the Kyrgyz President carried a
similar press release on the 15th. As part of deal, Ukraine agreed
to provide $27.3 million in "humanitarian aid as the result of the
recent earthquake" to Kyrgyzstan. This figure matched the amount
claimed by Kyrgyzstan as debt owed by Ukraine (refs B, C, E), but
Ukraine refused to recognize the claim as state debt. President
Viktor Yushchenko issued a decree on November 13 instructing the
government to provide this assistance money, and the Cabinet of
Ministers formally approved the proposal on November 14. (Note: We
have not been able to discuss the details of the agreement with
Ukraine's lead negotiators, as they have not yet returned to Kyiv.
Their staff at the Ministry of Economy has confirmed the signing of
the deal, however. End Note.)

Vietnam Bilat - Done
--------------------

3. Newly-acceded WTO member Vietnam joined Ukraine's WTO Working
Party late in the game, just in time for the latest Working Party
meeting on October 25 (ref C). Ukraine's lead WTO negotiator
Valeriy Pyatnytskiy traveled to Vietnam for talks immediately before
his trip to Kyrgyzstan, and Ministry of Economy official Zhanna
Pastovenska told Econoff on November 15 that a bilateral Market
Access Agreement had already been signed. (Note: Pyatnytskiy and
Serhiy Korsunskiy, Director of the MFA's Economic Cooperation
Department, had previously told Econ Counselor that the Vietnamese
only wanted Market Economy Status from Ukraine, and that since
Ukrainian anti-dumping laws did not have provisions for Non-Market
Economy Status, this made the issue easy to solve. End Note.)

EU Export Duties Issue - Still Unresolved
-----------------------------------------

4. Perhaps the only issue still holding up Ukraine's accession is a
disagreement with the European Union over export duties. The
Europeans have requested beefed-up language in the draft Working
Party Report regarding Ukraine's commitment not to use export duties
that violate WTO rules. In particular, the Europeans want Ukraine
to promise not to introduce any new export duties "unless justified
under an exception of the WTO Agreement." Pastovenska, who takes
the lead for Ukraine on drafting the Working Party Report, told
Econoff on November 15 that the GOU had not made any progress in
talks with the Europeans on the subject. Luis Manuel Portero
Sanchez, Head of the European Commission's Trade and Economic
Section in Kyiv, told Econoff on November 9 that the Europeans had
seen no progress from their side either, and said he thought
consultations between EU and USG negotiators might help.

Outstanding U.S. Issues - Not Holding us Back
---------------------------------------------

5. Post continues to stress that the GOU still needs to follow
through on several issues of importance to the USG, including
implementing regulations to create a system of registration for the
products of biotechnology, amendment to the country's trade remedy
laws, and amendment to laws affecting Technical Barriers to Trade
(TBT). The GOU has shown goodwill and willingness to move forward

KYIV 00002824 002 OF 002


in all these areas, however, and we are confident of continued
progress. One problem area, however, could be Ukraine's use of
grain export restrictions, which the GOU has promised to eliminate
prior to accession, but have meanwhile been extended well into 2008
(ref D). However, GOU negotiators have consistently confirmed to us
they will follow through on their commitment to lift the
restrictions.

Comment: Major Hurdle now Cleared
---------------------------------

6. The conclusion of an agreement with Kyrgyzstan marks a major step
forward for Ukraine's accession. Kyrgyzstan's prior intransigence
(ref B) had threatened to delay accession indefinitely. With this
hurdle now cleared, Ukraine is poised to wrap up accession within a
matter of months. The GOU will seek a final Working Party meeting
as soon as possible to approve the final version of the Working
Party Report, in the hopes to finish in time for a WTO General
Council vote at its December 19-20 meeting. By that time, Ukraine's
new Parliament should be in place, ready to pass a few outstanding
laws and to ratify the accession.

TAYLOR

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